Canada’s six largest banks have initiated a joint exploration of a system for tokenized Canadian dollar deposits, enabling digital representations of bank liabilities to move between financial institutions. The consortium includes Bank of Montreal, CIBC, National Bank of Canada, Royal Bank of Canada, Scotiabank and TD Bank Group. According to a Tuesday announcement, the first phase focuses on inter-institutional transfers within Canada, with potential future integration into broader digital asset systems. The initiative aims to support faster and programmable payments, with long-term plans to include other deposit-taking institutions.
This development follows recent regulatory clarity from the Office of the Superintendent of Financial Institutions (OSFI). On Sept. 10, OSFI stated that tokenized deposits are “not legally distinct from traditional deposits,” emphasizing that underlying technology does not alter legal nature. Unlike fiat-backed stablecoins issued by non-banks, these tokens remain direct liabilities of the regulated bank. This distinction is critical as Canada implements its Stablecoin Act under Bill C-15, enacted in March. That framework requires non-financial institution issuers to register with the Bank of Canada and maintain 1:1 reserves, but explicitly excludes banks already subject to prudential regulation. Consequently, covered issuers cannot represent their stablecoins as insured deposits.
The collaborative effort by Canada’s major banking institutions signals a strategic pivot toward modernizing payment infrastructure while leveraging existing regulatory frameworks. By defining tokenized deposits as legally identical to traditional liabilities, OSFI has provided a clear pathway for banks to innovate without triggering the stringent reserve and registration requirements imposed on non-bank stablecoin issuers. This creates a bifurcated market where bank-issued digital money operates under prudential supervision, potentially offering greater perceived safety and interoperability compared to private-sector alternatives. The focus on programmable payments suggests an intent to capture value in automated settlement layers rather than merely digitizing current account balances.
Institutional adoption of this model could reshape the competitive landscape for digital assets in Canada. As the project expands beyond the initial six banks to include other deposit-taking institutions, it may establish a standardized domestic rail for tokenized currency, reducing friction for cross-border or multi-party transactions. However, operational risks regarding technical integration and cybersecurity remain significant challenges. Market participants should monitor how these bank-led initiatives interact with the upcoming implementation of the Stablecoin Act in 2027, particularly whether the exclusion of banks from that regime leads to divergent user experiences or liquidity fragmentation between bank-tokenized deposits and regulated non-bank stablecoins.
